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Wednesday, October 24, 2018

Voting on the Collier County Sales Surtax

Vote Early in Collier CountyOctober 25 - November 3

Collier County voters have the opportunity to vote for or against a County Sales Surtax (surtax) on the November ballot. How I’ll vote on this item has been the most difficult decision I faced on this ballot, and I know that others have been struggling with it as well.

In this post, I’ll share what I learned by attending presentations and Town Hall meetings starting as long ago as the Board of County Commissioners’ (BCC) Infrastructure Sales Surtax Workshop last November, and through online research. I’ll lay out the pros and cons that have been cited and my responses to each. Then I’ll share how I will vote.

The ballot language

To enhance safety, mobility, and hurricane preparedness in Collier County and its cities by constructing, repairing, and maintaining roads, bridges, signals, sidewalks, parks, evacuation shelters, governmental and emergency services facilities; acquire land and support construction for workforce housing and career and technical training, veterans’ nursing home and expand mental health facilities; shall the County levy a one-cent sales surtax beginning January 1, 2019 and automatically ending December 31, 2025, with oversight by citizen committee? Yes or No

What is a sales surtax?

The state of Florida levies a 6% sales tax on the retail sale, lease or rental of most goods, with these exceptions as to tax rate: 4% on amusement machine receipts, 5.8% on the lease or license of commercial real property, and 6.95% on electricity. (More here.)

The state permits counties to impose an additional “discretionary sales surtax” and use the funds to pay for local authorized projects.

In addition to what we usually think of as taxable, transactions that would be subject to a discretionary sales surtax include:

goods or services delivered into or performed in the county;

an admission charged for an event in the county (e.g. movie ticket);

commercial real property lease or rental payments; and

the rental of living or sleeping accommodations (transient rentals) in the county.

The surtax would not apply to certain groceries, medical products and supplies, and fuel.

Florida’s county surtax rates are capped on purchases over $5,000. For example, for a motor vehicle purchased for $20,000 in a county with a 1% surtax rate, 7% tax would be due on the first $5,000 of the purchase price and 6% tax would be due on the remaining $15,000 of the purchase price. The cap does not apply to rentals of real property, transient rentals, or services.

Collier is one of six Florida counties that does not impose a sales surtax; the others are Broward, Citrus, Lee, Martin and Okaloosa. Florida’s remaining 61 counties do. Sales taxes charged within the state range from 6% to 8% (list here).

Who proposed the Collier surtax and why?

The Greater Naples Chamber of Commerce proposed the Infrastructure Sales Surtax shortly after Hurricane Irma last year, when the effect of the county’s failure to keep up with infrastructure maintenance during the recession became apparent. An important consideration was that adding a new revenue stream would make the County less dependent on its primary source of funds — property taxes, which decline during real estate downturns.

A divided County Commission

Recognizing that this would be a tough sell, County staff proposed and the BCC debated and tweaked a list of projects that would be funded with the surtax proceeds, and committed to a date certain when the surtax would end.

The final vote to put the surtax on the ballot was 3-2. Voting yes were Commissioners Burt Saunders, Andy Solis and Penny Taylor. Voting no were Commissioners Donna Fiala and Bill McDaniel.

Solis and Saunders seemed to have been supporters of the surtax throughout the deliberations, and Fiala and McDaniel were fairly consistently opposed. Taylor says her vote was not a show of support. “What I voted for was to put the sales tax question on the ballot and let the voters decide for themselves,” she wrote at the time.

How much money will be raised and how will it be used?

The surtax is expected to raise $490 million over seven years, or roughly $70 million a year. Of that, $420 million will go to the County and $70 million will be shared by the cities of Naples, Marco Island and Everglades City (the Municipalities).

A list of the County’s tangible capital projects to be funding by the surtax is here. A map showing the location of each project is here. At a high level, the list includes:

$191 million for transportation projects, including improvements to sidewalks, bridges, and several key roadways;

$139 million for facilities and other capital projects, including the Sheriff's Facilities, Big Corkscrew Regional Park, and hurricane resiliency projects; and

$90 million for community priorities, including a career and technical training center, mental health and addiction treatment facility, and a workforce housing land trust fund.

A list of the specific projects to be funded by the Municipalities with their share of the surtax has not been provided.

How can we be sure the money will be spent as promised?

According to the ordinance adopted by the BCC, upon voter approval, the County will establish a seven-member Citizen Oversight Committee to review the expenditure of the surtax proceeds. One member would be appointed from each County District and two would be appointed at-large. The Committee would serve as an ad hoc advisory and reporting body to the County and its members would be subject to the sunshine laws.

However since there is no list of projects to be funded with the Municipalities’ $70 million, it is unclear how the Committee will conduct its work with respect to the expenditure of those funds.

How can we be sure the tax will sunset as promised after seven years?

This is a question I have heard often and reveals a real distrust of government. The fact is that County does not have the legal authority to extend the surtax beyond the December 31, 2025, expiration included in the ballot language without voter approval.

What does a yes vote mean?

If you vote yes, you are voting to authorize the County to collect one cent for every dollar you spend on items subject to Florida sales surtax with the exceptions and limitations described above. This would raise the sales tax rate in Collier County from 6% to 7%, which is a one percentage point increase in the tax rate and a 16.67 percent increase in the amount of tax collected.

The surtax would go into effect on January 1, 2019, and remain in effect until the sooner of the year a total of $490 million is collected or December 31, 2025 (seven years).

Reasons to vote yes — and my comments

“Most of the infrastructure projects are sorely needed and the County says it cannot fund them without a new source of funds.”

I agree that most of the projects are needed. The transportation projects and many of the facilities projects are past due, and I’d really like to see the new mental health facility built near the David Lawrence Center.The question is how to fund them, how to prioritize them, and whether just one funding source — this surtax — is the best way to go.

“The surtax will allow the projects to be completed earlier than the County could do otherwise.”

I’m not sure why that’s so. For example, if the County borrowed the funds, why couldn’t the projects be completed on the same timeline as with the surtax?

“The County estimates that 30 percent of the surtax would by paid by tourists, visitors, and individuals who work in Collier County but don’t live here.”

The estimate is derived from information from the State Department of Revenue and the Bureau of Economic and Business Research. One can always challenge assumptions behind estimates. I can’t imagine how we’ll ever know how close to accurate this estimate turns out to be.

“The surtax avoids the additional interest expenses associated with borrowing the money, which the County estimates will exceed $100 million, and which would have to be paid for by Collier County taxpayers.”

I don’t know how the estimate was calculated. Clearly debt has a cost, but that’s not enough for me to rule out the option of borrowing for the truly critical infrastructure projects.

“The surtax is a more stable funding source than property taxes because it is not linked to property values which rise and fall with the economy.”

Somewhat true. But during an economic downturn, people spend less on all kinds of things, which would similarly depress sales tax and surtax revenue as well.

Reasons to vote no — and my comments

“Sales taxes are regressive, hitting hardest those who can least afford it.”

Florida has the third most unfair state and local tax system in the country, according to a 2018 study by The Institute on Taxation & Economic Policy. The 20% of residents who earn the least (i.e. those earning less than $18,700) already pay 12.7% of their family income on state and local taxes. The top 20% pay 5.6% of their income or less.

“The surtax will hit small businesses particularly hard because the $5,000 cap does not apply to commercial rent or lease payments.”

This is particularly concerning to me. On the one hand, Collier County wants to encourage entrepreneurship and diversify the economy, even as it’s facing an affordable housing crisis. It seems to me that this surtax would be a double-whammy to small businesses: they would pay it on what their family buys AND on the rent they pay to locate their business here. How much of the latter they could recoup from their customers is highly questionable.

“The Municipalities haven’t told the public how they would spend their $70 million share.”

This troubles me. Did the Municipalities even ask to share in the surtax? The City of Marco Island doesn’t even have a City Manager! And without a list of projects, how can the citizen oversight of spending be accomplished?

“Not all projects on the County’s list are equally important.”

True ... and some I don’t agree with at all. Further, as much as I’d like to see a new VA Nursing Home in Collier County ($40 million - see here), I don’t support raising taxes today in hopes that the federal government chooses to locate one here in the future. (The federal VA typically requires the state to kick in 35 percent of construction costs. See “VA nursing home would be built with Collier County sales tax increase,” Naples Daily News, 1/23/18.)

Supporters

The Greater Naples Chamber of Commerce proposed the surtax a year ago and is its greatest supporter. They established a PAC to advocate for its passage, and say, “A YES vote takes care of our citizens in a timely manner, addresses critical infrastructure needs, keeps property taxes low and spreads the cost among all users -– including visitors, tourists and workers.”

In addition, these community leaders, among others whose opinions I greatly respect, have published commentaries or letters in support of the surtax:

J. Dudley Goodlette, Chairman, One Collier and former state representative, here.

How I will vote

In writing this post, I’ve come to realize that I’ve been struggling between wanting to vote no and feeling like I should vote yes. The “should” comes from both the importance of and need for the projects and the tremendous respect I have for the people who support the surtax. They clearly believe it is in the best interest of the community. But I’ve listened with an open mind to the arguments for and against. And for the reasons shared above in response to the pros and cons, I will vote NO on the sales surtax.